Evidence On How Companies Choose Between Dividends And Open-Market Stock Repurchases
Dividends and open-market stock repurchases are by far the two most common mechanisms for distributing excess cash to shareholders. This article identifies and then tests three potentially important factors for the corporate choice between increasing cash dividends and initiating openmarket stock repurchases. More specifically, the authors argue that companies are more likely to distribute cash to investors through open-market repurchases than through dividend increases when (1) management believes its stock is undervalued, (2) management compensation packages include stock options, and (3) the company's stockholder base is dominated by institutional investors. 1998 Morgan Stanley.
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Volume (Year): 11 (1998)
Issue (Month): 1 ()
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